One of the last remaining powerful U.S. conglomerates, United Technologies Corporation (UTC) is the parent company of Pratt & Whitney, one of the most famous names in jet engines; Sikorsky, a leader in helicopter production, including the famous (or infamous) Black Hawks; Carrier Corp., the largest supplier of heating and air conditioning systems; Otis, the world’s largest elevator company; and Hamilton Sundstrand, a leading producer of aerospace products. UTC also has a large fire-safety products business based on its acquisition of British firms Chubb PLC and Kidde PLC.

UTC, which began with the amalgamation of various aviation companies during the 1920s, has had severe ups and downs over the years, especially at Pratt & Whitney. The engine maker once ruled the industry, then suffered a series of technical mishaps and fell behind competitors like General Electric. Since the early 1990s, UTC has remade itself, putting more emphasis on selling non-military products in foreign markets, where it has also shifted a substantial portion of its production and employment.

The company’s restructuring and overseas shift have worsened relations with its unions and with communities—especially in Connecticut—where it has cut back or shut down longstanding operations. Over the past two decades, UTC and its subsidiaries have paid tens of millions of dollars in fines and penalties in environmental cases.

In March 2008 UTC made an unsolicited $2.6 billion offer to acquire Diebold Inc., the controversial producer of electronic voting machines as well as ATMs and security systems.

Like
other major U.S. military contractors, United Technologies has at times
been accused of cheating the federal government. In 1992 the company
pleaded guilty to four felony charges and agreed to pay $6 million in
penalties in connection with an admitted conspiracy by Pratt &
Whitney to defraud the Pentagon by using insider information when
bidding on contracts.

In 1994 UTC was forced to pay $150 million to settle claims that
Sikorsky had submitted inflated bills in connection with its production
of helicopters for the Pentagon. The amount was then the largest amount
ever in a federal whistleblower suit.

In 1997 Pratt & Whitney agreed to pay $14.8 million to settle
charges that it took part in a scheme to divert $10 million in U.S.
military aid to a slush fund under the control of an officer of the
Israeli Air Force. In 2005 the Presbyterian Church USA called on UTC to
stop providing military equipment and technology to Israel for use in
the occupation of the Palestinian territories.

For the past decade, other religious groups have been filing
shareholder resolutions at each of the company’s annual meetings
raising questions about UTC’s foreign military sales.

In 2006 Norway’s government pension fund announced that UTC was one
of the companies it was banning from its investment portfolio because
of its assumed involvement in nuclear weapons.

Labor:

UTC’s
domestic workforce has traditionally been heavily unionized, though
about two-thirds of the company’s 215,000 employees are now based
outside the United States. The remaining domestic workforce is
represented by more than 20 different collective bargaining agreements.
Labor relations have grown more contentious in recent years in the face
of large-scale layoffs and restructuring. The majority of workers at
Pratt & Whitney have long been represented by the International
Association of Machinists (IAM). Relations between the union and
management traditionally were adversarial but peaceful. A major
exception came in 1985, when thousands of workers struck the company to
demand improved job security provisions and a better wage package than
the company was offering. The two-week walkout ended with an agreement
that improved worker protections regarding subcontracting and other job
security issues.

In 1993 there was upheaval at Pratt’s plants in Connecticut in
response to announced layoffs affecting a large portion of the
workforce. The company threatened even more layoffs unless it got
work-rule concessions from the IAM and tax concessions from the state.
Both the union and the state gave in, the latter providing a package of
tax breaks worth about $32 million.

Pratt kept on trying to cut employment, and the IAM did what it
could to limit the loss of jobs. In 1998 IAM members approved a
38-month contract that committed the company to keeping its Connecticut
plants open for the duration of the agreement. The following year Pratt
tried to relocate 550 aircraft engine repair jobs from Connecticut to
three southern states, but the move was blocked by a federal appeals
court ruling that the move violated the union contract.

In 2001 IAM members walked off the job at four Pratt plants in
Connecticut in a dispute over job security and pensions. The 11-day
strike ended after workers ratified a new contract in which the company
had agreed to strengthen job security language. During the next
contract negotiations in 2004, workers rejected the company’s final
offer but voted against striking, thus causing the company’s terms to
take effect. In 2007 Pratt workers approved a contract that provided
some additional job security but increased out-of-pocket health costs.

As a result of a decertification of the Machinists and the United
Auto Workers in the wake of a 1960 strike, most workers at Sikorsky
Aircraft are represented by the Teamsters. In 2006 Sikorsky workers in
Connecticut and Florida struck the company for six weeks. The walkout
ended after the workers reluctantly approved a company offer that
reportedly was little different from the one they had rejected before
deciding to strike.

Nearly 800 Hamilton Sundstrand workers represented by the United
Auto workers were locked out of their jobs in Rockford, Illinois in
2003 after they rejected what the company called its final offer in
contract renegotiations. The workers were allowed to return to the job
a month later after they approved a new contract that was reportedly
identical to the company’s previous offer. In the late 1980s and early
1990s the Sheet Metal Workers union used a variety of in-plant tactics
in lieu of striking in support of contract demands at Carrier Corp. The
union attributed the success of their 1988 negotiations to the
campaign. Contract negotiations went more smoothly in the 1990s, with
the union winning substantial wage and benefit improvements. Since
2003, however, Carrier has eliminated several thousand U.S. jobs and
moved more of its production overseas.

Environment and product safety:

UTC
and its subsidiaries have paid tens of millions of dollars in fines and
other penalties in environment cases in the United States over the past
two decades.

During the 1980s, UTC came under federal scrutiny for its handling
of polychlorinated biphenyls, which are suspected carcinogens. In late
1989 the U.S. Environmental Protection Agency filed a complaint against
the company alleging various violations of PCB regulations; two years
later the company agreed to pay $730,000 to settle the charges.

In 1991 UTC was the target of the largest criminal fine ever levied
to date for a hazardous waste violation. In response to charges brought
by the EPA, the company agreed to plead guilty to six felony violations
and pay a fine of $3 million in connection with illegal dumping of
toxic wastes at the Sikorsky Aircraft operation in Stratford,
Connecticut. The EPA's complaint included the charge that the in-house
environmental officer called attention to the dumping—which involved
oil, transmission fluid, and industrial solvents—in 1982, but the
company did nothing to correct the situation.

In 1993 the EPA and the Department of Justice fined UTC $5.3 million
for a series of abuses and handling and discharging hazardous wastes.
The company also agreed to undergo extensive environmental audits
through the end of the decade.

In 2005 the EPA reached a settlement with Carrier Corp. and UTC
under which the companies promised to spend $27.8 million to help clean
up groundwater contamination at the San Gabriel Valley Superfund site
in Southern California.

In 2007 Hamilton Sundstrand pleaded guilty to two felony violations
of the federal Clean Water Act and to pay $12 million in penalties for
dumping contaminated wastewater into the Farmington River in
Connecticut.

Human rights:

In
2006 Control Arms—a campaign launched by Amnesty International, the
International Action Network on Small Arms and Oxfam
International—published a report
which noted (p.16) that engines produced by Pratt & Whitney were
being used in Chinese Z-10 attack helicopters that were being sent to
Sudan and could be used in attacks against civilians. The report also
noted (p.13) that Pratt engines were used by the Brazilian company
Embraer in its Super Tucano aircraft that were being sold to Colombia,
where they could also be used against civilians.

United Technologies is one of a small group of U.S. companies
seeking permission to sell electronic surveillance equipment to the
Chinese government. The equipment is mainly designed to boost security
during the 2008 Beijing Olympics, but critics note that it will remain
in place after the games and could easily be use to monitor domestic
dissidents.

Anti-competitive and consumer protection:

In
February 2007 the European Commission levied fines against several
companies, including Otis, for operating a cartel for the installation
and maintenance of elevators in Belgium, Germany, Luxembourg and the
Netherlands. Otis was forced to pay a civil fine of about 225 million
euros, then worth about $295 million.

Location:

United Technologies Building

Hartford, CT, 06101

United States

Brief company history:

United
Technologies began with the commitment of Frederick Rentschler to
making better airplane engines. While serving in the Army Signal Corps
during the First World War, Rentschler ended up inspecting engines at
the pioneering Wright-Martin Aircraft Co. (later Wright Aeronautical).
He stayed on after the war and eventually worked his way up to the
presidency. He grew frustrated, however, with the preoccupation of the
company's directors with short-term profitability, so in 1924 he
resigned and set out to form a company of his own to build powerful
air-cooled engines of a type that the U.S. Navy wanted.

Rentschler
was able to achieve his goal with the help of Edward Deeds, a business
friend of his father, and George Mead, chief of engineering at Wright.
Deeds was chairman of machine tool company Niles Bement Pond, which
owned a Connecticut gun company called Pratt & Whitney. Established
in 1860, P&W had prospered making arms for the Union Army during
the Civil War. The two founders, Francis Pratt and Amos Whitney (a
cousin of Eli Whitney), went on to become international arms merchants,
but by 1901 they were getting old and decided to sell out to Niles.

The new owner pushed P&W to focus on making machine tools for
manufacturing weapons rather than the weapons themselves. This strategy
paid off, and by the First World War P&W was an important military
contractor. After the armistice, however, the company lost most of its
business and was looking for new ventures. Deeds persuaded his fellow
Niles board members (who included Rentschler's brother Gordon, the
president of the company) that Rentschler's engine plan made perfect
sense for P&W.

Everyone agreed, and in 1925 Pratt & Whitney Aircraft was
formed, half owned by P&W, which put up $250,000 for development
and turned over its idle machine tool plant in Hartford to Rentschler.
After only six months Pratt & Whitney turned out the first Wasp
engine for the navy. The admirals were pleased and, encouraged by the
recent recommendation of the presidentially-appointed Morrow Board that
the military make long-term procurement commitments, they ordered 200
of the engines.

Having established Pratt & Whitney with the military, Rentschler
turned to the civilian sector. The aircraft makers and carriers were
starting to grow as a result of federal incentives provided by air mail
contracts. Rentschler formed an alliance with William Boeing, the son
of a timberman who had started building planes in 1916. The result was
the Boeing 40A, which started out as a fighter but was adapted and
became a popular air mail carrier. During this period Rentschler, who
made extensive use of subcontractors to keep up with demand, also began
to export engines.

Pratt & Whitney was a thriving operation, making a profit of
some $2 million on the sale of nearly 1,000 engines. Also prospering
were Boeing's operations, which included both building planes (with
Pratt Wasp engines) and flying them on various air mail routes. Their
mutual success encouraged Rentschler and Boeing to join forces and make
even more money. In line with the financial consolidation that was
spreading throughout American business at the time, they formed a
holding company in 1928, which, under the name United Aircraft and
Transport Corp., soon became the largest aviation company in the world.

It was also one of the most profitable companies in the world, at
least for Rentschler and Boeing. They and the principals of the other
firms that were brought under the umbrella, including Sikorsky Aviation
and the Hamilton propeller company, exchanged stock in their own firms
for the rapidly appreciating shares of the holding company and enjoyed
massive gains.

United Aircraft, which in 1930 bought some additional carriers and
formed United Air Lines, became an increasingly dominant force in U.S.
aviation, especially after Boeing introduced its 247 in 1933. That
lead, however, evaporated after Donald Douglas came out with his
remarkable DC-2.

The industry was turned upside down in 1934, when the consolidation
that had been encouraged by Postmaster Walter Folger Brown came under
attack after the Roosevelt administration took office. The result was
the passage of the Air Mail Act of 1934, which mandated both a ban
(that turned out to be short lived) on private transport of airmail and
a more permanent requirement that aircraft producers and air transport
companies be separated from one another.

This meant that the United Aircraft behemoth had to be partially
dismantled. United Air Lines and Boeing's manufacturing operation were
spun off, and the United Aircraft Co. name was used as the parent firm
for what remained, which included Pratt & Whitney,
Hamilton-Standard, Sikorsky Aviation, and Chance Vought.

United survived a series of embarrassing Congressional hearings and
controversy over its dealings with Japan to play a major role in the
great airplane production push during the Second World War. Pratt &
Whitney expanded its manufacturing facilities enormously in 1939 and
began turning out huge numbers of engines, first for the French
government and then the British. The company had more orders than it
knew what to do with; still, it was slow in ending its relationships
with companies in Germany, Japan and Italy.

In
the United States President Roosevelt made a bold call in May 1940 for
the construction of 50,000 airplanes a year--at a time when the
military's total fleet was under 3,000. United's divisions, like the
rest of the aircraft industry, were jolted into high gear (and high
profitability). Pratt & Whitney was chosen as the primary engine
maker for the navy, Hamilton-Standard had a near monopoly on
propellers, and a huge contract for observation planes was granted to
Vought and Sikorsky. The company was excluded from early work on jet
engines, but Sikorsky was given military funding to develop helicopters.

After the end of the war, United was faced with the sudden loss of most
of its revenues. Yet unlike other aviation executives who began
diversifying their operations, Rentschler was confident that civilian
and military demand would soon rebound. The advent of the Cold War (and
later the Korean conflict) and the revival of commercial air transport
bore him out. At first United depended mainly on the military,
concentrating on the production of the jet engines that were rapidly
replacing piston engines in the Pentagon's fleets.

Pratt
& Whitney was, however, slow in making the conversion to jets in
its civilian business. One problem was that some of its customers were
uncomfortable dealing with a company that was tied to a competing
airframe maker, namely Chance-Vought. So in 1954 Vought was spun off
(and later became part of LTV). Pratt & Whitney shot ahead when the
J-57 engine it originally built for the military was enthusiastically
accepted by the aircraft makers and the airlines that were entering the
age of civilian jet travel. In 1958 United branched into avionics with
the purchase of Norden-Ketay Corp., producer of sophisticated
components for most of the Pentagon's missiles.

While continuing to expand its military activities, United also
maintained its lead in the civilian engine area largely through a close
association with Boeing. In the early 1960s the Seattle company
introduced its 727 jet, which was powered almost exclusively by Pratt
& Whitney, and later in the decade, when Boeing was prompted by Pan
American to build huge planes that would become known as jumbo jets, it
looked to Pratt to supply the power plants (as engines are called in
the industry).

The final design of the planes turned out to be considerably heavier
than Boeing originally intended, and this put much greater demands on
the engine Pratt & Whitney was developing. When the 747 began
flying it experienced frequent problems with engine overheating, and
the jumbos often had to be taken out of service. The repair costs that
had to be borne by United ran to several hundred million dollars. This,
along with problems relating to work on the F-111 fighter, caused the
company in 1971 to report its first net loss since 1934.

United's board brought in Harry Gray, the number three man at the
Litton Industries conglomerate, to try to fix the damage. Gray's
efforts were made more difficult by problems the company was having
with another engine—the F100—which was being developed for a joint air
force-navy program. The power plant was stalling and even exploding
during tests, but the military was so eager for the engines it lowered
its standards to allow Pratt & Whitney to pass. But when the
problems persisted, the navy dropped out of the joint procurement plan,
and the company was starting to run up major expenses in fixing the
engines supplied to the air force, which gave money to Pratt &
Whitney's rival General Electric to develop an alternative product.
Meanwhile, Gray was pursuing his goal of turning the company (which he
arranged to rename United Technologies in 1975) into a conglomerate
like Litton. His first major move in this regard was the 1975 takeover
of the venerable Otis Elevator. Gray was outbid for nuclear reactor
maker Babcock-Wilcox by J. Ray McDermott & Co., but in 1979 he
snared Ambac, a producer of diesel fuel injection systems; Carrier
Corp., a leading supplier of heating and air conditioning systems; and
Mostek, which made semiconductors (which was shut down in 1985 in the
face of intense competition from the Japanese).

While
Gray was out shopping, Pratt & Whitney was losing ground in the
commercial as well as military arena. Part of the problem was the
success of Airbus in taking business away from the leading U.S.
airframe makers Boeing and Douglas. Airbus, a European consortium,
initially decided to get its power plants from General Electric. In
1984 the company suffered another blow when both the air force and the
navy turned to GE for major fighter plane engine contracts.

Pratt & Whitney sought to stabilize itself by joining the trend
toward international cooperation among engine makers. In 1974 General
Electric had created a joint venture with France’s SNECMA. By the
mid-1980s such partnerships were the only way new engines were being
developed. The biggest combination was International Aero Engines,
formed in 1983 by Pratt & Whitney, Rolls Royce, and companies from
Japan, Italy, and West Germany.

International Aero stumbled in its development of engines for the
Airbus A340, allowing GE-SNECMA (later known as CMF International) to
fill the void. GE also shot ahead of Pratt & Whitney in their
individual efforts. Starting in the mid-1980s Pratt lost its 30-year
lead in the engine business as a result of poor planning and a
deteriorating reputation for quality and service.

Robert Daniell, who took over United Technologies after Harry Gray
reluctantly retired, set out to revive the company by cutting costs,
including the elimination of thousands of jobs. He also sought to
change the corporate culture from the autocratic atmosphere that
prevailed under Gray to one that was said to encourage team building,
"worker empowerment," and closer relationships with customers. He also
got Pratt into some joint ventures with its rival GE.

Daniell’s measures could not prevent Pratt’s business from taking a
nosedive in the early 1990s when its customers—the major airlines—fell
into a slump themselves. Compounding the problem for the company were
cutbacks in military aircraft spending by the Pentagon. On the other
hand, Pratt’s losses were being counterbalanced by strong results from
UTC’s other major businesses.

Daniell and his successor as chief executive, George David, dealt
with Pratt’s turbulence by seeking to restructure the entire
conglomerate through some 15,000 layoffs, relocation of jobs overseas,
revamping manufacturing techniques and entering more joint ventures.
More emphasis was also put on selling non-military products in foreign
markets such as China, where Otis soon controlled 25 percent of the
booming elevator market.

Although David and Daniell (who continued as chairman) ended Gray’s
nonstop acquisitions binge, they did purchase Sundstrand Aerospace for
about $4 billion in 1999 and merged it with Hamilton Standard. That
same year UTC sold off its $2 billion automotive business. Plans for a
merger with Honeywell International collapsed in 2001 when that company
accepted a last-minute offer from GE (but that deal later collapsed).
In two separate deals in 2005, UTC agreed to acquire Boeing’s
Rocketdyne Propulsion and Power subsidiary and British fire-protection
company Kidde PLC (which was combined with a similar firm, Chubb PLC
acquired two years earlier). In 2007 Sikorsky received its single
largest contract ever—a $7.4 billion commitment from the Pentagon to
purchase 537 Black Hawk helicopters for the Army and the Navy.

Financial information

Pratt & Whitney
(22 percent of 2007 revenues). Pratt is among the world’s leading
suppliers of commercial, general aviation and military aircraft
engines, though over the past two decades it has fallen far behind
rival General Electric. Its Rocketdyne business (bought from Boeing) is
a leader in the design and production of advanced aerospace propulsion
system for military and commercial applications, including the space
shuttle. Pratt is involved in various collaborations with other
companies, including International Aero Engines. One of the company’s
current military projects is the development of the F135 engine.
Military sales account for about one third of Pratt’s revenues. Its
major commercial customers are Airbus and Boeing.

Sikorsky (9 percent of 2007 revenues), Sikorsky, a
legendary name in helicopters, sells in both commercial and military
markets. Its current military programs include the MH-60S and MH-60R
Black Hawk helicopters for the U.S. Navy.

Hamilton Sundstrand (10 percent of 2007 revenues).
This business is a leading supplier of sophisticated aerospace
components such as flight systems, engine control systems and
environmental control systems. Hamilton has been engaged in development
programs relating to the F-35 Lightning II and A400M military aircraft
as well as the Boeing 787 and Airbus 380 airliners.

Carrier Corp. (27 percent of 2007 revenues).
Carrier, which has rebounded in recent years after slumping in the
early 2000s, is the world’s largest manufacturer and distributor of
heating, ventilation, air conditioning and refrigeration systems.
Carrier’s international operations, including U.S. export sales, now
account for more than half of its revenues.

Otis (22 percent of 2007 revenues). Otis, the world
leader in elevators, has been another big growth area for UTC,
especially in its international operations, which account for 80
percent of the segment’s revenues.

UTC Fire & Security (10 percent of 2007
revenues). This segment was created in 2005 after UTC acquired Kidde
PLC, a leading producer of industrial and commercial fire-safety
products. The segment also includes UTC’s former Chubb segment as well
as its electronic security business.

US: Business booming for U.S. defense contractors by Peter Bauer, MenafnAugust 20th, 2005U.S. defence contractors are riding high these days, buoyed by rising Pentagon spending on the wars in Iraq and Afghanistan as well as the high cost of homeland security in the U.S.-declared war on terror.
The fiscal 2006 defence budget is set to climb to 441 billion dollars, an increase of 21 billion dollars over 2005. It envisions an additional 50 billion dollars for the wars in Iraq and Afghanistan.